Just a decade ago, the worlds biggest tech beast was a relative minnow.
Microsoft had become notorious for disappointing product launches, stagnant innovation, and losing top talent.
The first true software giant was becoming a big tech dinosaur.
Fast forward to 2024 and Microsoft is the planets most valuable business.
Under the leadership of CEO Satya Nadella, stock has soared byover 1,000%in 10 years.
In January, the company reached a $3 trillion market cap larger than the whole GDP of France.
At the heart of the comeback is artificial intelligence.
Microsoft has embeddedAIacross the Azure cloud computing platform, the Office productivity suite, and the Bing search engine.
A key player in the turnaround was Sophia Velastegui one of the star speakers atTNW Conferencethis June.
Velastegui joined Microsoft in 2017 as a general manager of AI Products and Search.
Six months later, Business Insider named her one of the most powerful female engineers in tech.
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Back then, Nadellas plans were just starting to take shape.
Microsoft was not an AI company it was a software company.
How did they do that?
What are the things they did?
Velastegui played a growing role in that infusion.
From the reviledClippyto the jiltedCortana, Microsofts AI apps rarely charmed consumers.
Nadella immediately sought to change that.
His first big move after he was appointed CEO in 2014 was a sweeping embrace of chatbots.
The shift wasnt an immediate triumph: an early bot called Tay became aHitler-loving sex pest.
Despite the controversy, the plans rolled on.
As a company, Microsoft looked beyond its walls for that frontier.
The search led the company to OpenAI.
But its ambitions were consuming vast resources.
That brought the young contender into a collaboration with an ageing tech behemoth: Microsoft.
The software giant announced a partnership with OpenAI the next year.
Under the terms of the deal, OpenAI woulduseMicrosofts Azure cloud platform for research and development.
Commercialising OpenAI
Microsoft soon integrated OpenAI large language models (LLMs) into Azure cloud services.
Customers use the software for various app features, from chatbots and content generation to translators and personalised marketing.
The service grew rapidly.
Over 53,000 customers now used the service, Nadellasaid, includingover half of the Fortune 500.
The Azure plans reflected wider moves at Microsoft.
According to Velastegui, the companys AI strategy was laser-focused on delivering powerful products.
ArecentMcKinsey reportfound that this approach was common among successful AI adopters.
OpenAI has played a key role in the revival.
So the fact that [Nadella] got OpenAI to commit to Azure was an amazing masterstroke.
Azure was just the first of the pairs collaborations.
OpenAIs models were rapidly spreading across Microsofts product portfolio.
Microsoft enters the LLM era
OpenAI had a breakthrough moment in2020.
The architecture laid the foundations for ChatGPT.
Wiredsaidthe model was provoking chills across Silicon Valley.
Microsoft was clearly impressed.
In September, the software giant inked a new deal with OpenAI that provided an exclusive licence to GPT-3.
The applications quickly expanded across the companys products.
But the integration needed firm guardrails.
ChatGPT is interesting, but it doesnt do sources… To provide whatshecalls trusted information, Microsoft added references to LLM outputs.
The annotations link to the informations sources.
AI risks and rewards
Further safeguards sought to reduce the risks of harmful outputs.
Safetyfilters, abuse monitoring, hallucination detection., and simulating adversarial attacks have strengthened the defences.
Tools harnessing ChatGPT have also produceddisturbing outputs.
Microsoft said the behaviour was limited to a small number of prompts used to bypass safety measures.
The company also pledged to investigate the concerns.
In the meantime, the AI roll-outs are continuing.
Embedding OpenAI into Microsoft
Microsoft has baked OpenAI into a diverse array of apps.
One is Copilot, a coding tool that conductsa growing proportionof programming tasks.
Another is the revamped Bing search engine.
That remains a distant goal, but the early results showed promise.
OpenAI has also entered the Microsoft 365 Office apps.
The move highlighted Microsofts competitive advantage.Can Google work with OpenAI instantly… and bring it to their products?
The answer is no, Velastegui says.
Microsofts rivals, she adds, can still integrate OpenAIsoff-the-shelf products.
But that blunts the softwares edge.
That means your competitor can do the same, Velastegui adds.
If its easy for you, its also easy for them.
Analysts credited the rally to Microsofts lead in generative AI.
The future relationship
Not every OpenAI addition has been a hit.
Early customers of Copilothave decriedthe services costs.
Users of other Microsoft products, meanwhile, have grown frustrated with the coding toolsrelentless spread.
In the future, the tie with OpenAI could loosen.
Alongside the external addition, Microsoft is investing in homegrown foundation models.
The company ultimately plans for Azure to become a model garden.
In the evolving world of AI, Microsofts future relationship with OpenAI is uncertain.
But the marriage thus far has been extremely successful.
It also offers useful lessons on AI strategies.
Velastagui singles out one for special attention.
Dont solve these micro problems, issues, or goals, she says.
Solve the one that will make a difference in the business.
One of the themes of this years TNW Conference is Ren-AI-ssance: The AI-Powered Rebirth.
Story byThomas Macaulay
Thomas is the managing editor of TNW.
He leads our coverage of European tech and oversees our talented team of writers.
Away from work, he e(show all)Thomas is the managing editor of TNW.
He leads our coverage of European tech and oversees our talented team of writers.
Away from work, he enjoys playing chess (badly) and the guitar (even worse).
